Dollar Extends Gain on CPI Expectations | ForexGen Report

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The U.S. dollar extended its gain against other major currencies on Forex today as the investors expect higher April CPI figures from the report that will be released today at 12:30 GMT.

Dollar is now growing for a second day after the weak fundamental indicators were ignored yesterday and the traders reacted on the elevated export and import prices growth. Market participants expect that the fear of the accelerated inflation will prevent Federal Reserve from decreasing the interest rate on its next monetary policy meeting in June.

Market analysts are confident that a CPI reading of more than expected 0.3 percent will insure the dollar from more rate cuts. As the Forex market becomes more fundamentally driven rather than speculatively, higher inflation rate (or at least expectations for a higher inflation rate) will support the USD.

EUR/USD fell down today from 1.5465 to 1.5413 as of 7:46 GMT. GBP/USD declined from 1.9454 to 1.9403 after losing 0.6 percent yesterday. USD/JPY rate is heading up with a daily gain of 45 pips (0.4 percent) so far.

Dollar Will Lose 11% to Yuan in 2008 |Daily ForexGen

According to the research paper, released by United Overseas Bank Ltd., the yuan has a strong chance to appreciate further this year to the total of 11 percent gain against the U.S. dollar in 2008.

The Chinese currency has rose 4.3 percent up this year already, as the government used yuan to fight the accelerating inflation. Suan Teck Kin of United Overseas Bank confirmed in an interview today the statement from the research paper — PBoC will strengthen the yuan by about 7 percent before the year’s end:

The yuan is the now the most effective tool that the PBOC has to tackle inflation and trade imbalances.

Yuan may start to rise soon again, even before the Strategic Economic Dialogue between the U. S. Treasury and Chinese officials in June. Then there will probably be a pause during the Beijing Olympics, after which the currency may continue its gaining curve.

The renminbi (another name for the Chinese yuan) stopped appreciating in April and is still trading below its maximum levels — USD/CNY rate closed at 6.9940 today. UOB is expecting this rate to reach 6.6 by the end of the year.

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British Pound Grows on April PPI Report | ForexGen Tips

The Great Britain pound rose today against the U.S. dollar and the euro, partially recovering its losses from the last week, as the record high PPI growth added confidence that the Bank of England will not lower interest rates next time.

The prices for the British long-term securities declined today, while their yields increased, showing a higher inflation pressure for the economy of the United Kingdom.

The country’s producer price index increased 7.5 percent in a year-to-year comparison in April — the highest annual growth in a 24-year period, since the PPI record began. April to March gain in PPI was at 1.4 percent — also a record monthly growth rate.

EUR/GBP had a first significant drop this day since May the 1st as the currency pair declined from Friday’s close level 0.7923 to 0.7889 as of 11:51 GMT. GBP/USD had a first large growth since 30th of April today, it went up from 1.9506 to 1.9578 as of 11:51 GMT.

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Dollar Rose on Hoenig’s Hawkish Comments | ForexGen

The U.S. dollar rose today during the late Asian Forex trading session, as the traders reacted on the hawkish commentary by the Federal Reserve Bank of Kansas City President Thomas Hoenig.

Hoenig said that if the inflation pressures strengthen in U.S., Federal Reserve will probably increase the interest rates. According to him, the U.S. economy will recover from the current crisis later this year and the Fed will be forced to switch to the price growth.

Apart from the hawkish tone of the Hoening’s comments, dollar growth was also enhanced by the worsening situation in U.K., where consumer confidence fell to the lowest level since early 2004.

EUR/USD fell today after two days of growth seen this week and declined from 1.5532 to 1.5500 as of 7:38 GMT. GBP/USD fell today after two days of volatile bidirectional movement — it went down from 1.9732 to 1.9628.

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AUD Stops Growth after RBA Statement | ForexGen Signals

The Australian dollar stopped growing on the Forex market today after the Reserve Bank of Australia mentioned economical growth moderation in its monetary policy statement.

The RBA kept its 12-year high interest rates unchanged at 7.25 percent points today during the scheduled monetary policy meeting ruled by Glenn Stevens.

The Aussie has reached its 24-year record high level against the U.S. dollar recently and traded near that level before the monetary policy meeting. Reserve Bank of Australia Governor Glenn Stevens mentioned that the output growth may moderate this year, causing the currency drop from its high. The drop was limited due to the mention of the remaining inflation risks that leave possibilities for the further rate hikes:

In order to reduce inflation over time, growth in aggregate demand needs to be significantly slower than it was in 2007. Evidence is accumulating that this is occurring. Indicators of household spending have recorded subdued outcomes over recent months, and demand for credit by both households and businesses has weakened… Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation.

AUD/USD fell down today from 0.9465 to 0.9450, while AUD/JPY still fluctuates near its open rate — 99.23.

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